Commentary: China's anger over Panama ports sale is a wake-up call for Hong Kong tycoons

HONG KONG: The controversy surrounding the deal by CK Hutchison, founded by Hong Kong billionaire Li Ka-shing, to sell its ports operations on both ends of the Panama Canal to American investment giant BlackRock keeps growing.

Interest was piqued after Beijing-controlled Hong Kong newspaper Ta Kung Pao published three scathing commentaries condemning the planned deal, accusing the conglomerate of being unpatriotic and "selling out all Chinese people".

Beijing's displeasure is evident, as reflected in the acerbic tone of the first two commentaries. To eliminate any doubt about whether these pieces represented official views, the Hong Kong and Macao Affairs Office, China’s ministry overseeing the city, and the Central Government Liaison Office in Hong Kong reposted the articles on their official websites.

This has raised concerns in Hong Kong and beyond about the politicisation of business in a city long known for its freewheeling capitalism and minimal regulatory constraints on mergers and acquisitions.

WILL BEIJING OR HONG KONG INTERVENE?

Speculation is mounting about whether Beijing or Hong Kong will intervene to halt the deal – expected to be signed by Apr 2 – with reports suggesting that Beijing has ordered an investigation.

On Tuesday (Mar 18), Hong Kong leader John Lee remarked that concerns over the planned port deal deserved “serious attention”. He stated: “Any transaction must comply with the legal and regulatory requirements,” adding that his government would handle the case “in accordance with laws and regulations”.

It remains unclear what actions Hong Kong or Beijing can take, as there is no precedent for requiring regulatory approvals for such business transactions in the city. Unlike the mainland where authorities have not hesitated to intervene in business deals, Hong Kong operates differently under the “one country two systems” frame.

A notable example from the mainland was in 2020, when Beijing halted the initial public offering of Ant Group, controlled by Jack Ma, just days before what would have been the world’s largest share sale that year.

International media focus is currently on how Beijing’s angry response could undermine business confidence in Hong Kong, and even more so if further actions are taken. However, less attention has been paid to Beijing’s perspective.

To understand this unfolding story, it's essential to comprehend why Beijing is upset and why the Li family, which once enjoyed the highest level of access to China’s leadership, now finds itself in a difficult position.

WHY PANAMA DEAL HAS UPSET CHINA

All signs suggest that China’s leadership was blindsided by the deal's announcement.

CK Hutchison announced the deal on Mar 4, coinciding with the start of China’s Two Sessions – the annual meetings of the legislative National People’s Congress and the advisory Chinese People’s Political Consultative Conference (CPPCC).

Mr Victor Li, chairman of CK Hutchison and Mr Li Ka-shing’s eldest son, is a member of CPPCC. Hong Kong media speculated that a senior Chinese leader met with Victor about the deal behind closed doors in Beijing. Whether such a meeting occurred is unclear, but what is evident is Beijing's anger over not being informed in advance.

From Beijing’s perspective, there are reasons for concern. China could potentially lose a bargaining chip in its dealings with the US, as Presidents Donald Trump and Xi Jinping are reportedly set to meet in the coming months.

More importantly, Beijing's displeasure is understandable, given Mr Trump's expansionist ambitions since his second term began. Besides his desires to annex Canada as the 51st US state and buy Greenland, he has been especially vocal about “reclaiming” the Panama Canal to free it from Chinese control.

About 21 per cent of China’s cargo transits through the waterway that connects the Atlantic and Pacific Oceans, making it the second-largest user after the United States.

To put this into context, let’s consider the reverse scenario. Say BlackRock decided to sell 43 ports, including those in the Panama Canal and others in 23 countries, valued at US$22.8 billion, to CK Hutchison in Hong Kong.

It's easy to envision Mr Trump immediately condemning the deal on his preferred social media platform, Truth Social, citing national security concerns. US lawmakers would likely raise objections and launch congressional investigations to block the deal.

THE POLITICISATION OF BUSINESS

When announcing the deal, CK Hutchison’s co-managing director Frank Sixt stated that it was “purely commercial in nature and wholly unrelated to recent political news reports concerning the Panama Ports”. However, subsequent events have shown that the deal is far more than purely commercial.

US media reports suggest that Mr Larry Fink, BlackRock’s chairman and CEO, contacted Mr Trump to pitch the Panama Canal deal. This raises questions about the Li family’s evolving relationship with Chinese leadership.

Mr Li Ka-shing, dubbed “Superman” by Hong Kong media for his business acumen and connections, previously secured exclusive meetings with China’s leaders, including Deng Xiaoping and Jiang Zemin, during the first 20 years of reform and opening up. However, over the past two decades, his family’s relations with Beijing have cooled.

While Mr Fink has direct access to Mr Trump, the Li family may not enjoy the same privilege with Zhongnanhai, the compound where China’s top leaders live and work that is considered the equivalent of the White House.

Perhaps the Li family genuinely believes the deal is purely commercial or they believe informing Beijing would complicate the deal. Either way, the ensuing controversy should serve as a wake-up call for them and other tycoons in Hong Kong.

It pains me to say that the politicisation of business, especially in multibillion transnational deals in strategic industries, will become the new normal not only in the US, China and Hong Kong, but worldwide.

Wang Xiangwei is a former Editor-In-Chief of South China Morning Post. He now teaches journalism at Hong Kong Baptist University.